ConsumerMan: Now is the time for car shopping

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CHICAGO - DECEMBER 02: A Hybrid Chevrolet Tahoe sits in front of a dealership December 2, 2008 in Chicago, Illinois. U.S. auto makers today announced sales have fallen for the 13th consecutive months. General Motors Corp, the maker of Chevrolet, led the pack with a 41 percent drop in November sales. (Photo by Scott Olson/Getty Images)

Car sales are on the rise, but the auto industry’s road to recovery is slow. That’s good news for customers. Dealers and manufacturers are hungry for your business. So right now you can get a pretty sweet deal on a new set of wheels, especially if you have good credit and know how to bargain.

“There’s no-interest financing which can save you thousands of dollars, plus great rebates,” says Jack Gillis, author of “The Car Book 2010.” “And it’s much easier to negotiate the price of a new car because dealers are so desperate to sell.”

Lee Travis, who runs a home theater installation company in Seattle, just bought three GMC Savana vans for his business. He says he got a great deal on them. The MSRP was $26,000, but after negotiating a better price and adding in the $4,000 rebate, he paid just under $21,000 for each of them. And the dealer threw in a $2,500 commercial bin package for each van.

“This is the right time to buy,” Travis tells me.

Then there’s the Toyota factor. Faced with what seems like a never-ending series of recalls, Toyota has been forced to get aggressive with record-high incentives.

“Toyota has never offered zero-percent financing as they have done recently and they’ve been offering a lot of discounted leases,” notes Edmunds.com senior analyst Michelle Krebs.

On Monday, Toyota announced that it will continue no-interest loans and free maintenance on some models through June 1. The company is offering zero-percent financing for 60 months or a $3,000 rebate or on the 2010 Avalon.

A number of carmakers are aggressively trying to win over people who would normally buy a Toyota. Honda continues to offer 1.5 percent five-year financing on its popular Accord and Civic sedans.

Chrysler is offering zero-percent financing on many models. Volvo is offering $1,000 cash back and zero-percent loans for up to 72 months on the 2010 S80 with a V6 engine.

Choices, choices Depending on the model and your credit history, you may get to choose between a no-interest loan and a sizeable rebate. Rebates and other buyer incentives can save you significant money up front which lowers your monthly payments. But zero percent interest seems mighty hard to pass up. The only way to know what’s best for you is to do the math.

“Because many of those zero interest loans are only for three years, you’d have some big payments even if there’s no interest being charged,” notes Greg McBride, senior financial analyst at bankrate.com.

“There are a lot of lenders out there today charging rates below 4 percent but giving you the flexibility for a longer loan term that may be more suitable to your monthly budget.”

Manufacturers are also trying to drive more traffic with some impressive financing deals on leases. For example, you can lease a 2010 Honda Accord for $250 a month with $0 down, $0 security deposit, $0 due at signing and no first month payment.

Today’s lease agreements are generally better than they’ve been in the past. But a lease is still a lease, what Mike Quincy at Consumer Reports calls “a double-edged sword.”

A lease can lower your monthly payments and let you buy more car than you could otherwise afford. But all too often with a lease, the sticker shock comes at the end when you turn in the car. You could get socked for thousands of dollars in excess mileage or excess wear-and-tear charges.

“The lease payment might be a little bit lower, but I think you’ll find that in the long run you’ll spend more money when you lease.” Quincy says. “This is especially true when you consider that at the end of the lease you don’t have anything to show for your money.”

Leasing may be right for people who don’t drive a lot of miles and always want to have the latest and greatest car. But for most people, consumer advocates say, it rarely makes financial sense.

Driving home a great deal Even in a buyer’s market, dealers aren’t giving their vehicles away. Don’t let attractive incentives lull you into paying more than you should for that vehicle.

“There will be a lot of pressure on you not to negotiate for the price of the car,” Gillis warns. “Don’t pay retail for the car just to get the low-rate financing. You still want to bargain for the best price, typically $200 to $600 above invoice.”

To find out how to do that I spoke with Robert Ellis at Car Bargains, the new car buying service run by the non-profit organization Consumers’ Checkbook. Car Bargains gets five or more dealers to bid against each other and Ellis says you can do the same thing.

“Using the phone is a great way to depersonalize the transaction so you don’t get emotionally involved standing on the lot,” he says. You want to talk to the sales manager or fleet manager so you can deal with someone who has a different incentive to sell you the car. They’re looking for volume not a commission.

“Let them know that each one is going to get one shot,” Ellis advises. “Tell them you’re going to call five dealers and this is their best chance to make the deal with you.”

You want that price quote in writing and signed by the manager who approved the deal. Managers can quote a price; salespeople normally cannot. Ask them to fax it or e-mail it to you.

ConsumerMan Tip: You should seriously consider using a disposable e-mail address for this and think twice before giving out your home phone number. Otherwise, expect to be bombarded with spam and sales calls.

Published at 2:36 PM PDT on May 5, 2010 | Updated at 12:09 PM PDT on Jun 21, 2010